Despite an already strong run, Shanghai Luoman Lighting Technologies Inc. (SHSE:605289) shares have been powering on, with a gain of 35% in the last thirty days. The last month tops off a massive increase of 130% in the last year.

After such a large jump in price, you could be forgiven for thinking Shanghai Luoman Lighting Technologies is a stock to steer clear of with a price-to-sales ratios (or "P/S") of 9.8x, considering almost half the companies in China's Construction industry have P/S ratios below 1.4x. Although, it's not wise to just take the P/S at face value as there may be an explanation why it's so lofty.

Check out our latest analysis for Shanghai Luoman Lighting Technologies

What Does Shanghai Luoman Lighting Technologies' Recent Performance Look Like?

Recent times have been advantageous for Shanghai Luoman Lighting Technologies as its revenues have been rising faster than most other companies. It seems that many are expecting the strong revenue performance to persist, which has raised the P/S. If not, then existing shareholders might be a little nervous about the viability of the share price.

Is There Enough Revenue Growth Forecasted For Shanghai Luoman Lighting Technologies?

The only time you'd be truly comfortable seeing a P/S as steep as Shanghai Luoman Lighting Technologies' is when the company's growth is on track to outshine the industry decidedly.

Retrospectively, the last year delivered an exceptional 39% gain to the company's top line. As a result, it also grew revenue by 14% in total over the last three years. Therefore, it's fair to say the revenue growth recently has been respectable for the company.

Turning to the outlook, the next year should generate growth of 110% as estimated by the lone analyst watching the company. Meanwhile, the rest of the industry is forecast to only expand by 29%, which is noticeably less attractive.

In light of this, it's understandable that Shanghai Luoman Lighting Technologies' P/S sits above the majority of other companies. Apparently shareholders aren't keen to offload something that is potentially eyeing a more prosperous future.

What Does Shanghai Luoman Lighting Technologies' P/S Mean For Investors?

The strong share price surge has lead to Shanghai Luoman Lighting Technologies' P/S soaring as well. It's argued the price-to-sales ratio is an inferior measure of value within certain industries, but it can be a powerful business sentiment indicator.

We've established that Shanghai Luoman Lighting Technologies maintains its high P/S on the strength of its forecasted revenue growth being higher than the the rest of the Construction industry, as expected. Right now shareholders are comfortable with the P/S as they are quite confident future revenues aren't under threat. Unless the analysts have really missed the mark, these strong revenue forecasts should keep the share price buoyant.

Don't forget that there may be other risks. For instance, we've identified 1 warning sign for Shanghai Luoman Lighting Technologies that you should be aware of.

Of course, profitable companies with a history of great earnings growth are generally safer bets. So you may wish to see this free collection of other companies that have reasonable P/E ratios and have grown earnings strongly.

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This article by Simply Wall St is general in nature. We provide commentary based on historical data and analyst forecasts only using an unbiased methodology and our articles are not intended to be financial advice. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.